Sunday, November 29, 2009

The Column May Have Died, But The Annual Tax Credit Column Lives On

As my virtual readers know, I don’t have a newspaper column anymore. I’d feel bad about it, except that after they dropped me, the newspaper went bankrupt. Say goodbye to the house liberal, then say hello to Chapter 11. But every year, usually over Thanksgiving weekend, I’d write to remind readers of the whacked-out Arizona income tax laws which make it exceedingly easy to make several types of charitable donations.

Of course, you should be giving to charity anyway. But in Arizona, we make it really easy even for die-hard libertarians (a/k/a “the obnoxiously and ideologically cheap”) to become charitable. After all, it’s “free!”

Several tax credits let you reduce your state income taxes by the amount of your donation. This discussion, as always, assumes you itemize deductions and don’t pay AMT. If so, donate by December 31, then in April, you wind up paying less in state income taxes by the amount of the donations due to several dollar-for-dollar tax credits. All it costs you is some time, and some stamps (for those where you can’t give online).

First, contributions to “private school tuition organizations” that offer scholarships to private schools qualify for a tax credit for individuals of up to $500 and for married couples up to $1,000. Please consider giving to Schools With Heart Foundation, 1131 E. Highland, Phoenix, AZ 85014, or call (602) 252-5866, and designate your contribution for The Family School. Schools With Heart is one of the better PSTOs; it doesn’t let donors earmark for specific children, doesn’t spend money on insiders, and isn’t violating the Internal Revenue Code rules on charitable organizations like numerous Arizona PSTOs. With The Family School, you don’t have to hold your nose when you write your check.

You contribute now, then report your contribution on Form 323 when filing state income taxes in April, getting a full dollar-for-dollar credit up to the cap. But make sure to include these donations as charitable contributions on your federal return to get the full benefit.

Second, the less-generous public school tax credit lets single taxpayers give and get back up to $200, and married taxpayers, up to $400. You write the check directly to the school, not to a PTO or foundation, and report this credit on Arizona Form 322.

Of course, wealthier school districts benefit more from these tax credit donations, so if you want your money to make more of a difference, you should contribute to the Isaac School District, 3348 W. McDowell Road, Phoenix, AZ 85009. You can download the contribution form, or call Julie Nino at (602) 455-6700. Your gift is far more significant in a school district with 90 percent of its students at or below poverty and two-thirds from non-English-speaking homes.

Third, donations to charities which assist low-income residents qualify for another tax credit if you exceed the “baseline” of your charitable contributions for 1996 or the first year you itemized, if later. Lots of Arizona charities qualify for this Form 321 credit, which is available up to $200 for single taxpayers and $400 for couples.

I serve on the board, and having disclosed that can urge you, without any guilt whatsoever, to contribute to Devereux Arizona’s behavioral health programs. Devereux serves children in foster and residential programs who won’t get holiday gifts without contributions like yours. You can give gifts at no cost because you’ll pay exactly that much less in state income taxes. Send your check to Devereux Arizona, 11000 N. Scottsdale Road, Suite 260, Scottsdale, AZ 85254, or click here to donate to the program. You also can give online.

A fourth credit comes from Arizona’s voter-approved system publicly-financed state elections. This credit may not be around much longer, due to our activist U.S. Supreme Court, but you can still write the checks in 2009 and pay less in taxes in April. The credit is surprisingly generous (and increased slightly from last year), and is now $640 for individuals and $1,280 for couples, or up to 20% of your total state tax liability, whichever is greater. Send your contribution to Citizens Clean Election Fund, 1616 W. Adams, Suite 110, Phoenix, AZ 85007, or click here for the form. For this credit, note that there’s no separate credit form for your Arizona tax return, instead you list the credit directly on your Form 140.

Fifth, the Military Family Relief Fund credit, for tax years through 2012 only, allows individual (but not entity) taxpayers to claim $200 for single taxpayers or heads of households, and $400 for married couples filing joint returns, for MFRF donations. To claim the credit, you need a receipt from the Arizona Department of Veterans’ Services, and to give you a receipt, the ADVS needs your full name, address, and last four digits of your Social Security number. (The SSN numbers are required by law, A.R.S. §41-608.04(F). Sorry.) The MFRF is also capped at $1 million a year, so you need to give before they reach the ceiling – if they do. Send your contribution to MFRF, c/o Arizona Department of Veterans’ Services, 3839 N. 3rd Street, Suite 200, Phoenix, AZ 85012. The contribution form is here, but for more information, contact Donna Adams of ADVS at (602) 263-1837.

The same deal applies as with the other credits; you take the credit on your Arizona return, and make sure you include it in your charitable donations for deduction on Schedule A of your federal return, and the contribution is completely offset by the credit and deduction and costs you nothing.

Finally, after making your cash donations, give something else that you really won’t miss. Call United Blood Services at (602) 431-9500, or make an appointment online, to donate blood. If you’re hydrated before you donate, it’s easy, fast, and the post-donation cookies are both tasty and guilt-free.

So make some donations by Dec. 31 and reduce your state taxes on April 15. Yes, it’s very bad law, but you still can use it to do some good. And consider it useful training; learning how to make charitable contributions when they’re free is the first step toward training yourself to make them when they’re not.

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